Q: I have recently upgraded my car (previous one was on Hire Purchase finance) and have now a new agreement in place, still on Hire Purchase. Due to circumstances I am now unable to afford the repayments. Please can you advise what the next step should be? Am I able to sell it privately? Or am I tied to the car finance agreement?
A:The first thing you should know is that this isn’t an uncommon problem. When someone’s circumstances change it can be a worrying time and having a car on finance can add to your financial woes. The vital thing for you to do is to contact your car finance company and to ask them what your options are. Without knowing your full circumstances it is hard for us to advise you accurately but you may have the choice of any of the following options:
Sell the car to settle the remainder of the finance agreement.
This is one option but must be discussed with your finance company. You are not allowed to sell the car without their knowledge so this is very important you discuss this first. When you contact the finance company you need to ask for a settlement price. You should then get your car valued. At this point you will be able to see if there is a difference between the price of the car and amount you need to settle. Often, if you are early on in an agreement the car will not be worth the value of the car finance as you will not have paid off much interest. Selling the car for less than the settlement figure will still leave you with the responsibility to cover the difference.
Ask the finance company if you can hand the car back or change it for a cheaper vehicle.
You may be able to arrange with the finance company the return of your car. If you simply return it they will sell it on and you will probably be liable to pay the difference between the settlement price and the price they sold the vehicle for. Alternatively you may be able to swap your loan for a cheaper option on a less valuable car, which would also reduce your monthly repayments amounts.
Your car finance company may also offer you other alternatives so it is important that you contact them before making any choices. It is vital that you don’t simply stop the direct debit or making your monthly payments. If you do this then you will damage your credit file and the car could be repossessed by the finance company. Make sure you contact your finance company as quickly as possible to resolve the issue in the best possible way.
